The Economics of Pricing Yourself Out of the Gas Market

A West Covina CA gas station consistently has the highest prices in California, and therefore in the entire U.S. At $4.79 it’s lately been more than a dollar per gallon more expensive than another station right across the street. I’ve noticed it for some time on GasBuddy, but a reporter has finally dropped by to see what is going on.

Covina

“Based on our numbers, that’s the highest,” said Patrick DeHaan, senior petroleum analyst for Gasbuddy.com. “There could be others out there.”

…The average gas price in West Covina is $3.62 according to the Automobile Club of Southern California. Industry experts are predicting averages will climb above $4 by Memorial Day.

Business at the Mobil appeared slower than other stations, however. In a half-hour period around noon, only five customers stopped at the station. Another two drove up but then left.

Across the street, a Shell station was selling regular for $3.75 a gallon.

Customers stopping there often complain about the high prices across the street, according to the clerk.

A¬†clerk at the Mobil station referred questions about prices to the owner, Mohamed R. Khidr, who couldn’t be reached Thursday.

So, questions:

  • Why does this station owner seemingly not care that his station is priced almost out of the market?
  • At a few driver per hour in peak periods, is he even covering his costs?
  • Is this just a fantastic moneymaking strategy of finding the nitwits who don’t check prices?
  • Does he have great snacks?
  • How are we to explain someone pricing themselves so strangely when a competitor’s price is visible across the street at much lower levels?

The floor is yours.

[Update] Apparently someone else has been wondering the same thing.

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